Low loan margins hurting house sales, says Rehda


The Real Estate and Housing Developers’ Association Malaysia (Rehda) is talking to the government to persuade lenders to abandon their low property lending margins as one of the ways to reduce the property glut.

Rehda Selangor chairman Zulkifly Garib said the majority of the financial institutions are only offering between 50% and 60% loan margins, forcing many potential house buyers to abandon their plan to purchase a home.

He said Rehda — which represents about 2,000 property developers — is in talks with related authorities and formulate ways to revive the sector and benefit consumers.

“I think that the government is consulting the banks for the best solution in resolving this matter (low margins for property purchases).

“Bank Negara Malaysia (BNM) needs to look at the loan margins and pay closer attention to this issue as it is one of the drives for the overall economic growth,” he told The Malaysian Reserve (TMR) recently.

According to BNM’s data, the value of housing loans that had been approved by lenders last year stood at RM87.2b (Pic by Muhd Amin Naharul/TMR)

The property sector is currently going through a challenging period. Sales for certain properties — especially high-end condominiums — had been sluggish, while prices had eased from their highs in the last two years.

Stringent lending rules and a more cautious approach to lending saw lenders reducing their exposure to the property sector, resulting in a drop in sales and buyers shying away from purchasing a house.

Lenders are also worried about their risk exposure to the sector in the event of an economic fallout.

With 60% financing, a buyer for a RM500,000 property will have to cough up RM200,000 in cash — a sizable size for first-time house buyers.

Property developers had repeatedly blamed lenders for the glut faced by the sector.

However, lenders and the central bank had reiterated that only those who qualify should be given loans. The central bank is trying to manage the country’s household debts. Housing loans account for the largest portion of Malaysia’s household debts.

Zulkifly said Rehda is also engaging with the government on ways to reduce the price of houses and products that are required by the market.

He said buyers from the middle-income group and young families who are looking to upgrade to a bigger home are the most impacted, following the lower loan margins rule.

Zulkifly — who is also the project director of UEM Sunrise Bhd — said houses priced below RM600,000, which are witnessing the highest demand, have failed to be translated into final sales as buyers are unable to secure the amount of loans.

According to BNM’s data, the value of housing loans that had been approved by lenders last year stood at RM87.2 billion.

Total outstanding loans to households stood at RM841 billion from the total RM1.46 trillion outstanding loans.

Meanwhile on the possibility that the property market is heading towards urbanisation, Zulkifly said the market may not be ready for such a concept.

“Compact non-landed units actually only applies in the Klang Valley, or maybe in Johor. The demand for landed units is higher compared to high-rise products.

“We do not want to push products that are too urbanised when the market is not ready, as this would further worsen the glut,” he said, adding that Malaysia still has sizeble undeveloped land parcels.

TMR recently reported that Titijaya Land Bhd is urging local players to adopt compact-unit development and urbanisation to gain a competitive edge against the influx of foreign players, mainly from China.

Compact high-rise units in the Klang Valley with an average built-up of 37.16 sq m — namely a studio or a SoHo (small office, home office) — have received positive feedback from house buyers, especially from the 20-35 age group.